Item 1.01 Entry into a Material Definitive Agreement
On April 1, 2022, Generation Income Properties, Inc. (the “Company”), through certain subsidiaries (the “Borrowers”) of its operating partnership, Generation Income Properties L.P. (the “Operating Partnership”), entered into two loan agreements (the “Loan Agreements”) with Valley National Bank (the “Lender”) in the aggregate amount of approximately $13.5 million to refinance seven of the Company’s properties (the “Properties”). The Loan Agreements consist of one loan in the amount of $2.1 million that is secured by the Company’s property in Rockville, IL and one loan in the amount of $11.4 million that is secured by the remaining six properties located in Manteo, NC, Plant City, FL, Grand Junction, CO, Chicago, IL, Tampa, FL, and Tucson, AZ. Each of the Borrowers issued a promissory note, dated April 1, 2022, to the Lender for the amount of the Loan Agreement to which such Borrower is a party (the “Notes”).
The Notes bear interest at a fixed rate of 3.85% from April 1, 2022 through and until March 31, 2027. Commencing April 1, 2027, the interest rate on the Notes shall be adjusted to a fixed rate equivalent to the weekly average yield of nominal (non-inflation indexed) U.S. Treasury securities adjusted to a constant maturity of five years as published in the Board of Governors of the Federal Reserve System Statistical Release (Publication H.15 [519]) plus 2.5%, subject to a floor interest rate of 3.85% per annum. The Borrowers paid the Lender origination fees equal to $67,500, in the aggregate, for the funding of the loans pursuant to the Loan Agreements. Each Note has an interest-only payment term for the first 12 months, after which time the Borrowers shall make monthly payments, which shall include repayment of principal based upon a 25-year amortization from the date of such Note. The entire principal balance of each Note plus all accrued and unpaid interest thereon shall be due and payable on March 31, 2032. David Sobelman, the Company’s Chairman, President and Chief Executive Officer, entered into two guaranty agreements (the “Guaranty Agreements”) pursuant to which he guaranteed the payment obligations under the Notes if they become due as a result of certain “bad-boy” provisions, individually and with respect to the Loan Agreement relating to the Company’s property in Rockville, IL, on behalf of the Operating Partnership. The Notes are secured by the Properties, as described in the first paragraph above, and the associated rental income from those Properties, pursuant to the terms of two mortgage and security agreements (the “Security Agreements”).
Each Loan Agreement requires the Borrower(s) thereunder to maintain a debt service coverage ratio of not less than 1.50 to 1.00 tested annually, beginning December 31, 2022. The Loan Agreements contain other customary affirmative covenants, negative covenants and events of default. Should any event of default occur under a Loan Agreement, the outstanding borrowings, together with accrued interest, may be declared immediately due and payable.
The foregoing summary of the terms and conditions of the Loan Agreements, the Notes, the Security Agreements, and the Guaranty Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the agreements attached as exhibits hereto, which are incorporated herein by reference.